The year 2001 has also given rise to an overall improvement of the financial standings of the main owners and operators, which is a significant achievement. It has been quite a time since such a situation has occurred.

The financial results posted by the main operators over the first six months of the year give an idea of the magnitude on the increase in freight rates as compared to 2000. Stolt-Nielsen showed a 64 % improvement on turnover over the first two quarters and Odfjell-Seachem 40 % over the same period.

The general improvement this year in the chemical sector can be explained by both structural and temporary reasons.

From a purely structural point of view, whereas the market over the last few years was suffering from a chronic imbalance due to the important surplus tonnage, the year 2001 gave place to a more balanced situation often in favour of owners with demand in certain markets being in excess of vessel availability.

Freight rates have logically benefited from this better balance. The rise registered already in the first quarter, carried on right up to the end of the second quarter, then marked a pause during the summer months. The slowing down of the world economy, particularly in America which plays such a prominent role, made itself felt at the middle of the year, and the resulting drop in demand mainly for voyages from the US Gulf, led to a substantial drop in spot rates at this time. These lower levels have spread throughout all markets following the events of September 11th. However, the overall balance in supply and demand which exists and seems not to be under threat for the next three years means that the petrochemical sector, in contrast to others such as the dry bulk, containers and tankers which have all seen plunging rates, has freight levels which have levelled out but without any appreciable drop.

Another structural change which has contributed to the general improvement of the market has been the rationalisation within the chemical carriers, put in place by owners several years ago in order to reduce costs and to adapt to the new regulations and ever more stringent requirements in terms of security and efficiency. Mention should be made of the agreement between Stolt-Nielsen and Tokyo Marine on the routes to the Far East done in order to reduce the competition and the risks of port delays.

Other factors but of a temporary nature also contributed to the positive improvement of financial results for owners this year. On the one hand the continuous drop in crude oil prices which have gone from $24 per barrel at the beginning of the year to finish at $18 at the end, has resulted in lower bunker prices and thus lower operating costs. On the other hand, the strong dollar in relation to European currencies has helped European owners and has also had a beneficial effect on their financial results.

Clearly at year's end, uncertainties as to the future of the chemical carrier sector exist. These uncertainties lie mainly in the increases for insurance premiums to be applied for next year on hull & machinery, the P&I Clubs or risk premiums paid out to the crews, but above all on the timing and the extent of the recovery in the world economy.

Inter-Mediterranean activity has become a two-tiered market distinguished by some charterers requiring only quality ships, with the result that good modern vessels have obtained substantially higher levels.

The North European short-sea traffic, movements to and from the Mediterranean, have experienced significant fluctuations in the volumes and freight rates, with notably a strong demand in the first quarter in the northbound voyages and then in the second quarter on the southbound voyages. Rates increased by as much as 20 % in the peak period and by some 10 % on average over the year, which has resulted for 3,000 ton chemical lots in freights at around $30 per ton for cargoes into the Med and some $27 / 28 per ton on the Med / North Europe leg.

On movements from US to Europe, the market has remained quiet up until September, despite certain occasional variations. Since the events of September 11th, spot activity has slowed down considerably, in particular for "trading" cargoes. The contract nominations however have been kept at a high level throughout the year, even despite a slight reduction since the month of September.

In the beginning of the year freight rates for easy chemical lots of 3,000 tons between Houston and Rotterdam stayed at the levels that they experienced at the end of 2000, namely in a bracket between $37 / 39 per ton. At the end of the first quarter, rates dropped down to $35 per ton and steadied out at this level until the middle of the summer.

The drop registered at this time worsened with the slowing down of the American economy and the events in New York in September, to achieve a level of about $33 per ton at the end of the year.

On movements from Europe to US, the market continued to rise during the first quarter with a peak coming in March / April 2001. Big parcel lots of oil products and MTBE started seeing lower rates as from May onwards and this tendency carried on up until the end of the year. Cargoes of chemical products however have remained at healthy levels both in terms of volume and rates right through the year.

For 5,000 / 7,000 ton lots of easy chemicals from Rotterdam to Houston, freight rates went from $29 per ton at the start of the year up to $39 per ton in March / April and have settled down since May to a level of $32 / 35 per ton.

Traffic from Europe into the main ports of S.E. Asia has been on the increase and freight rates have also risen considerably over the year, with a high at the end of the summer. Four main owners share this market, covering for the most part contracts in the hands of industrialists.

On the spot market rates for lots of 1,000 tons requiring stainless steel tanks have increased by some 20 %, for example out of Rotterdam into Singapore, Korea, and Taiwan the market has gone from $55 per ton to $65 per ton.

Nonetheless it should also be noted that at year's end the fall-off in activity linked to a policy of wait-and-see, in particular by China and her Asian interests, preferring to hold off for the cost of raw materials to drop further before restocking. The events of September 11th as well as the over-optimism in the demand forecast have also provoked a lack of confidence with exporters of chemical products.

This slow-down has brought with it a drop in the market which is now back to the freight rates that were seen at the end of last year.
 

The level of scrapping has remained extremely low. It is unfortunately a recurring theme in this sector which is preventing a steady elimination of the oldest units. Since January 2001 only six vessels for 32,720 dwt have been sent to the scrapyards. These figures are to be compared with last year's eight ships for 93,000 dwt and in 1999 with only three for 7,200 dwt.

As we mentioned last year, in addition to vessels dedicated to transporting chemicals, there is a growing number of coated product tankers, classified IMO II or III, which can be added and whose orders have virtually exploded since the 'Erika' incident of 1999. In the 25,000 / 50,000 dwt size category, no less than 220 vessels for 9 million dwt are on order and 35 for 1.3 million dwt have been delivered since January. These ships can potentially compete with the stainless ships for transporting easy chemicals. Nonetheless, one can say that the chemical carrier fleet is in the process of getting into better shape.
 

Globally despite the rather pessimistic economic forecasts for 2002, the chemical carrier sector seems well placed to face the difficulties that lie ahead in the coming months. According to the experts, the slowing down of the economy should produce a pause in the trend towards higher freight rates in this sector for next year, and consequently give reduced returns in the short term for the main operators.

The downturn in the economy will probably bring about certain changes in the flow of traffic, but on the whole demand is healthy and should even see a slight increase of 4 % for next year, above the increase in supply which is planned to be about 2 % in 2002.

We do not foresee an important risk of over-capacity of tonnage over the next few years, except in the case of a collapse in the product tanker market which could then hypothetically look for work within the chemical carrier trade. On balance we believe that freight rates should stabilise over the coming months before starting to pick up again with the predicted, or at least hoped for, recovery of the world economy in the second half of 2002.
 

2001 was thus a year, which was orientated principally towards newbuilding of small product tankers (between 5,000 and 15,000 tons). Turkish shipyards were able to offer numerous resales available for fairly prompt delivery, amongst which were the 'Pyla', the 'Clipper Legend' and the 'Clipper Leader' (10,000 dwt, 12,000 cbm) and the 'Sukran C' (4,700 dwt).

Nonetheless, the number of second-hand sales was considerably higher, which goes to show that it is always possible to find buyers who are looking for valuable employment of ships, be it even single-hull, as long as the price is right. We can illustrate this with the sale to Aksay of two chemical carriers the 'San Mateo' and the 'San Pedro' (11,300 dwt, stainless steel and zinc coated, built in 1988) for $10 million en bloc.

In general it can be said that 2001 is in the post-'Erika' era characterised by a marked acceleration of the fleet's renewal with a confirmed preference by charterers for the 10,000 / 15 000 tons size category.

If we were to judge the chemical carrier market solely within its own confines and criteria, we could conclude that the offer and demand of tonnage is in better balance than two years ago. This is borne out by a firming up of freight rates since the end of 2000. However, we should also take into account the growing number of product tankers which are also suitable for chemical cargoes (as can be witnessed by the numerous product/chemical carriers of 35 / 45,000 tons, ordered in Korea or Croatia this year). The decline in rates, which we are experiencing currently in the sector of product tankers, could weigh indirectly on that of the chemical traffic which is exposed to these ships. We expect in consequence that ships above 20,000 tons in the oil market and the easy chemical sector will play an increasingly reciprocal role as a balancing factor in the coming years, even if in general the chemical carrier market will remain less volatile than that of the products which is more exposed to the spot market.

For vessels under this size category, the prospects are good given the distance still to be covered before a renewal of the fleet meets the growing requirements of the oil charterers and the lack of flexibility of demand in this segment of the market. Once again the proverb of Florian will prove to be true, namely that "To live happily, be discreet".